Condos still a bargain for some buyers Lower prices may outweigh drawbacks

February 23, 1992|By James M. Woodard | James M. Woodard,Copley News Service

Condo sales are down. Lower-priced single-family home sales are up.

And there's an interesting relationship between the two current trends.

For many years, young families and single individuals who couldn't quite afford a single-family home would settle for a condominium residence, at least until their financial situation improved.

This way, they could still own their condo unit and benefit from equity buildup.

Recently, families have been more inclined to take advantage of today's low mortgage interest rates and lower prices by purchasing a single-family home -- jumping over the condo-ownership phase. This leaves the condo sales market in the doldrums.

"As mortgage rates continue to fall, more and more first-time buyers enter the market," said Dorcas Helfant, president of the National Association of Realtors. "Many of these buyers find that favorable financing has made single-family homes affordable.

"We have seen a lot of entry-level buyers choosing single-family homes over condominiums as their starter homes. If people have the chance to purchase a single-family home that fits their budget, they'll take it."

But bypassing condos as a possible home purchase, may be a mistake in many cases, says Don Carlton, owner of a multi-office real estate brokerage firm. "There are some outstanding bargains in today's condo market."

Condos are still less expensive than single-family homes and meet the needs of many buyers, Ms. Helfant added.

The national median price for existing condominiums is now about $83,000.

"Condominiums can still serve as an effective stepping stone for those who can't yet make the stretch to single-family homes," Ms. Helfant said.

With condo prices at today's low level, many people can purchase and move into one of these residences and pay less in payments than they were paying in rent.

And as a condo owner, the family or individual can enjoy ownership tax breaks and buildup of equity.

Keep in mind, however, that even though prices of condos have come down, the condo association fees usually remain the same.

And, of course, there is no tax advantage or equity buildup in that portion of a family's monthly housing expenses.

With a single-family home, with no association fees, most of the monthly payments go toward the mortgage -- and that provides tax deductions for interest payments and principal reduction (equity buildup) each month.

If a single-family home can be purchased at today's lower prices, bringing the monthly payment down to about the same level as condo payments, there are obviously strong advantages in going for the single-family home.

Another reason for the recent upsurge in home sales is the slight increase in mortgage interest rates. Many prospective buyers who have been waiting for the lowest possible rates now feel this is the time to act before rates climb higher.

Nationally, condo sales and prices are definitely down.

The number of resales dropped 4.8 percent from the third to fourth quarter of last year -- and the sales pace is still dropping.

Condo prices dropped 4.2 percent between the same two quarters, according to a report from the National Association of Realtors.

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Q. Considering the international real estate market, where are homes most expensive -- and least expensive?

A. The most expensive markets are Tokyo and Honolulu.

The least expensive are El Paso and Mexico City, according to a recent international home price survey conducted by Century 21 Real Estate Corp.

"Because of the high prices in and around Tokyo, an executive earning an annual salary of $150,000 is unlikely to buy here," said Yoshiaki Takaichi of Century 21 Real Estate of Japan.

"But he or she could rent a home in the suburbs for an average of $2,000 a month. Rent could be double that in the city."